Sustainability Balanced Scorecard - Wave Master Ltd - Case Study Example

Business Report on Sustainable Management Name Professor Institution Course Date Business Report on Sustainable Management Executive Summary There has been increasing interest in the business environment to enhance adopt sustainability in their operations to balance the short-term objective of increasing profits and turnover with the long-term objectives which is the environmental and social performance. The Sustainability Balanced Scorecard has proved to be a critical tool for measuring the balance between profit and sustainability performance in an organization. Therefore, in this report, the paper will develop a strategic map for Bosbster and use it to suggest a suitable Sustainability Balanced Scorecard which Bobster can use at Wave Master Ltd to clearly convert the strategy into some financial and non-financial endeavors. The Strategic map will be used mainly to identify strategic objectives of the company in connection to sustainability. The report will also identify suitable indicators where which can be used to evaluate the performance of the company sustainable objective. Contents Executive Summary 2 Contents 3 1.0 Introduction 4 2.0 Strategic map of Bobster 5 3.0 Sustainable Balanced Scorecard to Bobster 7 3.1 The approach to the development of a Sustainable Balanced Scorecard 9 3.2 Classification of the strategic objectives 10 3.3 Suitable indicators for measuring the fulfillment of the objective 11 4.0 The eventual impacts of the indicators chosen regarding the sustainability objectives suggested on SBSC 12 5.0 Conclusion 13 6.0 References 14 1.0 Introduction Corporate sustainability frameworks have become a progressive trend in management research in the last two decades (Deegan, 2014, p. 416). With most polls on management indicating that consumers now associate with companies which participates in sustainability, managers have tried to make this concept part of their strategic management. In the past, companies only concentrated on employees and financial performance while neglecting its social and environmental performance. Kaplan and Norton (1992, p.71) reacted by developing a balanced scorecard which would help managers measure financial and operational performance. However, with business environment moving towards sustainability performance, Sustainability Balanced Scorecard (SBSC) was formulated, to integrate financial and non-financial “soft” concepts associated with social and environmental issues into management (Schaltegger & Lüdeke-Freund 2011, p.6). As such, Sustainability Balanced Scorecard has become an important tool in management in the recent past. Managing Director of Wave Master Ltd, Mr Bobster Master is one of the managers who have seen the need to adopt Sustainability Balanced Scorecard in a bid to incorporate social, environmental and the financial outcomes in the conventional four Balanced Scorecard perspectives to secure company’s future financial success and existence. Therefore, this report will develop a strategic map to Bobester and use it to recommend a suitable Sustainability Balanced Scorecard (SBSC) which translates the company’s strategy into some array of the financial and non‐monetary measures. In addition, the report will choose one of concepts of developing Sustainable Balanced Scorecard and explain it in relation to Wave Master Ltd case study. 2.0 Strategic map of Bobster According to Kaplan & Norton (2004), the strategy map is defined as a plan which is applied to display the major strategic goals pursued by a firm. Therefore, the strategic map of Strategic map of Bobster basically displays strategic goals of Wave Master Ltd. The strategic goals of the company are placed under various perspectives including learning and growth, internal processes, customer and financial as shown in figure 1 (Kaplan & Norton, 2004, p. 34). At the bottom of the hierarchy is learning and growth perspective which entails recruiting competent staffs, training the staffs, having effective IT systems and improving employees’ motivation. According to Schaltegger and Lüdeke-Freund (2011, p.8), it means the capability of organization depends on the employees, organizational quality and IT system. As a company which intends to expand its operation from Australia to Bangladesh, Bobster needs to recruit who will work in the new outlet. Therefore, the strategic objective would effectively hire competent employees and train within a period of two months. The staff motivation is another learning and growth concept which Bobster will need to focus on. WML’s staff needs motivation to overcome challenges of foreign country and to show commitment to offer customer value. Therefore, the strategic objective is to offer bonuses and promotion to motivate his employees in foreign market (Kaplan & Norton, 2004). The internal processes perspective involves improving partnerships, enhancing product eco-efficiency and minimizing effects of product life cycle (Kanga et al. 2015, p.126). Bobster aim is to partner with other company to not only increase brand awareness, but also to benefit from comparative advantages. Bobster is seeking partnership with Zhu Ling Company in Bangladesh to reduce its production cost and benefit from high quality Bamboo. The hierarchy also encourages production of environmental products. WML is doing exactly that by making surfboards made from bamboo and board shorts from the recycled bottles. Länsiluoto and Järvenpää (2008, p.186) claimed that Trading in ecologically friendly products reduces product risk of environmental pollution. Financial hierarchy entails minimizing the shareholders’ revenue and cost reduction (Schaltegger & Lüdeke-Freund 2011, p. 8). Therefore, the strategic objective in Strategic map of Bobster is intending to expand his company WML to Bangladesh to increase the customer base, reduce the cost of the product and to increase shareholders’ return as shown in figure 1. Hierarchy perspective Financial Customer Internal Processes Leaning & Growth Figure 1: Strategic map of Bobster 3.0 Sustainable Balanced Scorecard to Bobster Hierarchy perspective Objectives Lag Indicators Lead Indicators Financial Increase Profit Maximizing shareholder’s return Net profit or ROI Capital cost EBITDA Sales Increased sales and revenue Market share Customer Improve customer satisfaction Inspiring loyalty Customer satisfaction score Market share Customer value index Customer Shopping survey Sales revenue Internal Processes Making eco-friendly quality Creating partnerships Minimizing product life New product Revenues GHC emissions New partnerships Number of New products sold Number of business partners lead time Leaning & Growth Hiring competent staffs Training & Motivating Staffs Using technology Staff culture score IT maturity Performance assessment Training Period Effectiveness of IT systems Economic Expanding to other markets. New markets Number of new markets. Environment Planting of more bamboo to replace the used ones. Increased in bamboos for production Number of bamboo trees. Social To employee some locals and train them Providing workplace safety Percentage of local employs. Performance evaluation Safety measures Number of local employees Operation efficiency Safety report Figure 2: A Sustainable Balanced Scorecard 3.1 The approach to the development of a Sustainable Balanced Scorecard The Bobster’s SBSC is based on Kaplan and Norton’s traditional “Balanced Scorecard” (BSC). However, due to the recent focus on sustainability, the paper recommends that Bobster modify the existing BSC perspective by adding additional perspectives. The additional perspectives needed by Bobster in his Sustainable Balanced Scorecard will include environmental, social and environmental and perspectives, objectives and Lag Indicators and Lead Indicators as shown in figure 2. The reason for choosing this format of developing sustainable scorecard is because from the case study, it is apparent that sustainability has been made part of the WML’s core strategy (Langfield-Smith, Thorne and Hilton, R 2012, p.839). Therefore, the report focuses on the sustainability as a core value of the manager. For instance, WML demonstrates its focus on sustainability by using Bamboo for making surfboard and recyclable bottles for board Shorts. The practice shows a company which is committed to sustainable production. Both the practices are co-friendly hence reducing risk of pollution. The strategy can be analyzed from triple bottom perspective of environmental perspective. Cadden and Lueder (2012) opined that recycling of bottles is a sign that Bobster understands that resources are limited and if they misuse them, the future generation will not have the capacity to enjoy similar nature of life as the current or past generation did. In its expansion plan, the company has also asked about the safety of the location in Bangladesh to enable them take precautions before any risks. The company considers employees’ safety to shows their commitment to social sustainability. Hopwood, Unerman & Fries (2010, p. 7) argued that social sustainability considers the balance the lives if people and their way of life. Since scored is about performance, sustainable balanced scored of Bobster measures financial, customer, internal processes, and learning and growth perspectives. A financial perspective measures the performance of the company from shareholder standpoint and entails factors like the return on investment, cash flow and net profit (Schaltegger & Lüdeke-Freund 2011, p.8). A customer perspective sustainable balanced scorecard measures the performance of the company from customer point of view. In particular, the tool measures customer satisfaction and market share. On the other hand, Gray (2010, p.47) posited that the internal processes entail factors which are required to fulfill customer objectives. Therefore, the SBSC measures the product quality, timely service or product delivery. Learning and growth theme involves the capacity the company needs to make sure internal processes run smoothly. 3.2 Classification of the strategic objectives Based on the Sustainable Balanced Scorecard there are more strategic objectives compared to strategic map (Falle et al. 2016 p. 4). The strategic objectives extend from the traditional balanced scorecard (BSC) to SBSC. In this report both the BSC perspectives and BSBC perspective will be classified as economic, environmental or social. From the sustainable balanced scorecard, actions such as expanding, reducing production cost and increase partnership can be classified as economic sustainability. Cadden and Lueder (2012) argued that economic sustainability needs to consider a long-term financial investment as opposed to volatile and short-range revenues. Expansion into a foreign country is a practice which shows that company too committed to set up a base where it may serve its customers for several years (Hansen & Schaltegger 2012, p.13). The aim of this is to create brand awareness and to increase its profit. Similarly, economic sustainability is to create a business plan which leads to expanded action and avoids calamitous loses. At the moment Bobster is considering a partnership Zhu Lin Company. Schaltegger and Wagner (2006, p. 8) contends that the strategic alliance is sustainable because the company will be able to avoid challenges of new markets and benefit from cheap raw material and labour. Other objective can also be classified as environmentally sustainable. For instance, using environmental materials to produced eco-friendly products and reduce pollution are categorized as environmentally sustainability (Burritt & Schaltegger, S 2010, p.833). Moso bamboo as regarded as the most natural raw materials for making surfboard. Bobster also partner with a company which plants bamboo and ensure that this resource is not depleted. Using high technology in production also encourages recycling and reduces the dangers of waste products (Länsiluoto & Järvenpää 2008, p. 187). Therefore, in this context use of technology in production is regarded as environmentally sustainable. Hiring the competent locals and providing workplace safety are classified as social sustainability (Gray, Owen & Adams, C 1996, p.105). The company will need to employ some of the locals to provide labour for the company. The local employees know the needs of the customers and can help the company make products which meet their demands. Hopwood, Unerman & Fries (2010, p.12) claimed that offering employment to the local can be interpreted by the society that besides objective of making profits, the company understands their social challenges and is dedicated to solving them. 3.3 Suitable indicators for measuring the fulfillment of the objective There are three forms of the performance indicators managers can use to measure the fulfillment of their sustainability objective. According to Langfield-Smith, Thorne & Hilton (2012, p.845), the three key indicators are operational performance indicators, management performance indicators and environmental condition indicators. The report considers the last three objectives of social, environment and economic perspectives. The company can use operational performance indicator to measure the fulfillment of the economic objective. Bobsters economic objective is to use high technology to attain efficient production and reduce waste emissions into the atmosphere. Such performance is known if the company measure kilograms of waste material collected as a percentage of the production output. The company can also use management performance indicator gauge the management effort put towards improving the environmental performance (Langfield-Smith, Thorne & Hilton, 2012, p.845). The indicator measures the cost of suppliers, performance of employees and cost of staff training. The indicator is particularly used for measuring the fulfillment of the social objective. Bobster needs to use environmental condition indicators to measure the fulfillment of the environmental objective. The company can measure the actual environmental condition around the company. For WML, Bobster can assess the quality of solid waste being produced during the production process. The company can also measure the highest decibels of noise produced by machine in production processes. 4.0 The eventual impacts of the indicators chosen regarding the sustainability objectives suggested on SBSC Studies have shown that every indicator has its impact on the sustainability objectives. Operational performance indicators have the capability of quantifying the waste hence enabling the company to know whether the objective is fulfilled. For instance, operational performance indicators provide information like the energy consumption and waste levels in relation to volume of production (Langfield-Smith, Thorne & Hilton 2012, p.839). If the waste is too high, the company can improve WML can improve its technology. Management performance indicators on the other hand, impacts organization’s performance on environments (Langfield-Smith, Thorne & Hilton 2012, p.839). This type of indicator measures the management’s effort to improve the environment. Such efforts include the staff’s training, staffs compliance, and cost of the supplier audits. The fact the effort is being measured can influence the management to engage in sustainability. However, there is a concern that the process is not effective because the company can be engaging in sustainability but there is no commitment. Environmental condition indicators impacts sustainability objectives in that enables that company to know environmental conditions which are closely connected to its activities (Ji & Deegan, 2011, p.133). For instance, the company can assess the percentage of waste it discharges into the environment. The importance of this indicator is that one measure the impact it environmental actions in quantitative basis. Nevertheless, Langfield-Smith, Thorne & Hilton (2012, p.841) asserted that the indicator might not be accurate in its measures because much other organization may be contributing the same environmental condition in the area. 5.0 Conclusion The report has established out that the sustainability is a widely used concept by Bobster in its operations. The sustainability practice has been greatly used for responsible management and to build its reputation in Australia. The sustainability practices cut across three triple-bottom line approaches including social sustainability, economic sustainability and environmental sustainability. In particular, Bobster has employed the use of technology and environmentally-friendly raw materials manufacture eco-friendly products. In addition, the Managing Director seeks to expand into Bangladesh to get cheap materials and labor. Bobster also value for employees’ health, and sought to know the safety of potential partner company Zhu Ling Company. Despite the environmental practices, without a proper performance measurement the company efforts may not be seen. In an attempt to understand Bobster’s environment, the report has created company’s strategic map and used it formulate a Sustainable Balanced Scorecard, and analyze it on the basis of development and indicators. 6.0 References Burritt, R & Schaltegger, S 2010, Sustainability Accounting and Reporting: Fad or Trend? Accounting, Auditing & Accountability Journal, vol. 23, no.7, pp.829 – 846. Cadden, D.T & Lueder, S.L 2012, Small Business Management in the 21st Century, Flat World Knowledge. Deegan, C 2014, Financial Accounting Theory, 4th edition, McGraw Hill Australia, Sydney. Falle, S, Rauter, R, Engert, S & Baumgartner, R.J 2016, ‘Sustainability Management with the Sustainability Balanced Scorecard in SMEs: Findings from an Austrian Case Study’, Sustainability, vol. 8, no.545, 1-16. 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Schaltegger, S & Lüdeke-Freund, F 2011, The Sustainability Balanced Scorecard: Concept and the Case of Hamburg Airport, Leuphana University of Lueneburg. Schaltegger, S & Wagner, M 2006, ‘Integrative management of sustainability performance, measurement and reporting’, International Journal of Accounting, Auditing and Performance Evaluation, vol. 3, no. 1, pp.1-19. Read More